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Recent upgrades of hospitality businesses on port tidelands

Bali Hai: Operating for more than five decades, the Polynesian-style restaurant on Shelter Island had a $4.4 million face-lift in 2010 that transformed it into a much more contemporary dining spot that has since seen its revenues rebound significantly. The first phase, completed in 2009, featured a 2,350-square-foot detached outdoor pavilion. That was followed by a more substantial upgrade that reinvented the entrance with a redwood art screen facade by artist Miki Iwasaki. A private dining room was added upstairs, as was an outdoor deck.

Point Loma Seafoods: The $2.8 million redo, completed earlier this year, was prompted by the approaching renewal of the restaurant’s lease. Owners Jack and John Christianson demolished the former 7,904-square-foot restaurant and seafood market, replacing it with a two-story, 11,306-square-foot building. It includes viewing areas and an outdoor dining patio that was added to the second floor. The former 9-foot ceiling gave way to 34-foot ceilings in the new structure.

San Diego Marriott Marquis & Marina: The 1,362-room hotel already has undergone a roughly $100 million makeover that included renovation of its guest rooms, a redo of the lobby and front entrance and an overhaul of the pool area, which included two new waterfalls, Jacuzzi, pool bar and restaurant and new lighting and sound system. Recently approved was a second-phase, $100 million project that calls for a new three-level, 35,000-square-foot ballroom and 35,000-square-foot exhibit hall.

A familiar presence on Harbor Island for the last four decades, Tom Ham’s Lighthouse is preparing to temporarily shut down after the first of the year as it undergoes a $3.5 million makeover designed to raise its profile as a waterside dining destination.

While its owners, Susie and Larry Baumann, realize it’s time to reinvent the aging restaurant, they’re being prodded along by the San Diego Unified Port District, which creates incentives for tidelands properties to invest heavily in improvements before their leases expire.

Earlier this year, Point Loma Seafoods debuted its $2.8 million makeover, while two years earlier, the Bali Hai on Shelter Island, also run by the Baumanns, underwent a more than $4 million face-lift.

The expectation is that such renovations, although costly, will significantly boost business while also generating higher lease revenues to the port.

“We decided that it was really time to reinvent the Lighthouse as we did with the Bali Hai,” said Susie Baumann, whose late father Tom Ham opened the Lighthouse restaurant in 1971, 16 years after taking over operation of the then struggling Bali Hai. “We couldn’t just add a new chef and a great new menu, because people don’t have in their heads that you made great new changes.”

Port officials noted that the restaurant has rarely generated enough revenue to exceed its minimum base rent of $190,000 a year, which will eventually rise to $300,000 under a new 30-year lease option agreement authorized earlier this year by Port Commissioners.

Following the Bali Hai renovation, the district said it realized an increase in the restaurant’s percentage rents of more than 70 percent and expects a similar outcome with the Tom Ham’s repositioning.

“We have a policy that dictates how we proceed (with leaseholds) in order to give tenants a road map of what our expectations are,” said Karen Weymann, director of real estate for the port. “The basic premise is that we all make more money if they keep investing in their leasehold. That gives us more rent to invest in port facilities.”

As an incentive for tenants to improve their properties, the port agrees to not seek a new operator if the business submits a redevelopment plan while there is still 20 percent of the lease term remaining. Tom Ham’s lease had been due to expire in 2021.

“If the tenant doesn’t reinvest, we can go out with a (request for proposals) and look elsewhere,” Weymann explained.

Best known for the still functioning lighthouse incorporated into the design of the restaurant, Tom Ham’s has thrived on its weekend brunches but needs an updated design and expanded bay-view dining to grow its customer base, Baumann acknowledged. It received a modest face-lift seven years ago, she added, but nothing approaching the extent of the planned redesign.

The proposed redesign of the early California Spanish-style structure calls for a second-story, 1,500-square-foot deck for patio dining; the removal of heavy wood trellises in favor of a more contemporary, metal and glass exterior; and relocation of the bar to the bay side, Baumann said. Inside, windows will be lowered to offer a better view of the downtown skyline.

Also envisioned are an outdoor plaza and wedding court and a shoreline public promenade that will include a west-facing lookout with a seating area.

“What we found at the Bali Hai was that our lounge business really grew after the renovation,” Baumann said. “Between lunch and dinner we’re quite busy now, and we expect that to be the same at the Lighthouse. It gives you seven more shifts you didn’t have before, and people are really looking for that kind of thing.”

Architect Graham Downes, who also executed the redesign of the Polynesian-themed Bali Hai, will helm the Lighthouse renovation, which is expected to be completed in time for a May 1 reopening. The Bali Hai, which was also modernized, included the addition of a resort-style lounge featuring a backlit honey onyx bar and a 500-square-foot outdoor redwood deck off the upper dining room.

Because of the temporary shutdown of Tom Ham’s, the restaurant’s 80 employees will be laid off and invited to reapply for open positions, including executive chef. Intent on remaking the Lighthouse’s identity as more than a restaurant known just for its view, Baumann said her hope is that once reopened it will appeal as much to locals as it will to tourists.

“You really need to make a statement with your cuisine, we’ve done that at the Bali Hai, and we’re confident that the team can do that at the Lighthouse,” Baumann said. “We’ll start taking applications March 1 and work with the people who apply, have them cook for us and go through that whole process. We had 300 applications for the Bali Hai top chef position.”

While the Baumanns had anticipated early on raising menu prices at the Bali Hai by as much as 40 percent given the extent of the upgrades, they eventually abandoned that plan because of the still fragile state of the economy once the restaurant reopened.

“We decided we couldn’t do that because we’d alienate decades of customers,” said Baumann, noting that they’ve had to take out a loan to finance the Lighthouse remodel. “We went up more like 5 to 8 percent on prices, and we’ve been very successful with that concept. Where you don’t want to be is at the very highest end of fine dining.”